The Nikkei share average closed 0.4 per cent lower at 21,507.54 after touching 21,243.38 in early trade, the lowest since Oct. 30.

The Topix dropped 0.6 per cent to 1,615.89 after falling to as low as 1,598.54. The Topix is not far from bear market territory - defined as peak-to-trough losses of more than 20 per cent. When the Topix fell to 1,581.56 on Oct 26, it was 17 per cent below its 2018 peak of 1,911.31 in late January.

"Major factors dragging down Japanese stocks are a sell-off in US shares and concerns about weaker forecasts in Japanese corporate earnings due to worries about weak global growth," said Hikaru Sato, a senior technical analyst at Daiwa Securities.

Before bouncing on Wednesday, oil prices tumbled more than 6 per cent on Tuesday in heavy trading volume, caught in a broader Wall Street sell-off that was fed by mounting concerns about a slowdown in global economic growth.

Nissan Motor Co steadied 0.4 per cent from the sharp drop on Tuesday in reaction to the arrest on Monday night of chairman Carlos Ghosn.

Traders said that an immediate impact on Nissan's bottom line was unlikely.

Nissan has cheap valuations, with its price-to-earnings ratio around 7.52 and shares trading below book value. Its dividend yield is at 5.92 per cent, compared to the Nikkei's yield at 1.98 per cent.

"Nissan is one of the popular stocks with high dividend yields, and when the overall market is weak, retail investors tend to buy high dividend stocks," said Yoshihiro Okumura, general manager at Chibagin Asset Management.

Department store operator Takashimaya Co nosedived 16 per cent to be the biggest loser on the main board after it said it will issue convertible bonds.